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Pam and Jim Halpert of The Office
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The Office

Characters: Pam and Jim Halpert (Jenna Fischer and John Krasinski)

Pam and Jim Halpert recently got married and had a baby. They also own a home. Jim worked as a regional co-manager in the Scranton branch of Dunder-Mifflin/Sabre but voluntarily stepped back into his old sales role in order to make more money. Pam returned to work after maternity leave and seems happy with the decision. She is now the office administrator.

Key issues

4 steps

  • Saving for college.
  • Saving for retirement.
  • Maintaining an emergency fund.
  • Life insurance to protect their young family.
  • Establish a budget and emergency fund.
  • Life insurance.
  • Save for retirement.
  • Save for college.

Advised by: Kimberly Foss, Certified Financial Planner, president of Empyrion Wealth Management in Roseville, Calif.

Establish a budget and emergency fund

Pam and Jim really need to have a budget. Successfully managing a budget can strengthen their relationship because they'll have to work together as a team. They are going to have a bigger success ratio in their marriage because they have skin in the game to make the budget work and both have a say in it.

After Jim and Pam establish a budget, they need to work on their emergency fund. They should have two to three months' worth of their salaries saved -- for both of them. And six months' of living expenses. That will be the first savings goal.

Life insurance

With both of them working, they have a vested interest in providing money for the family and should both be insured. They need to have enough insurance that the surviving spouse would have enough money to sustain their lifestyle. If one of them were to pass on, they have to plan for income replacement.

It's really important to cover those expenses, but you also have to account for inflation wrapped around all that -- including inflation's effect on their salaries going forward. There are two ways to do the calculations. One is kind of a ballpark figure which is five to 10 times your annual salary. Better, they should go to a website such as Bankrate.com for a life insurance calculator.

Saving for retirement

People have a baby and think, "I have to start saving for college."

That's not exactly true. Pam and Jim are at that critical age where they can save $1 now and that dollar is going to grow faster and compound in value more than if it's saved when they are 45 years old.

It's important that they are participating in their 401(k) as much as they can. If they can't contribute the full $16,500 every year, then it should be as much as they can.

Retirement savings have to take priority over college savings. If you can't make sure you are going to be self-sufficient in retirement, you may end up living with your kids.

Saving for college

I'd like them to max out their 401(k) contributions before saving for Cece, but they can start a savings account for her while they are doing that.

Here is what I want them to do for Cece for her first birthday: open a 529 account.

The best plan last year was the Utah 529 account with the lowest expenses and best selection of investments with the lowest expense ratios. Basically, a lower expense ratio means higher returns for the child.

The accounts have little coupons that can be printed out. They can give the coupons to people, family and friends, and say "Hey, if you're going to spend $25 anyway, spend $5 on a toy and then something for her future."

People are hesitant to give money because they feel like the parents are just going to spend it. So, I advocate writing a check to the actual fund or just make it like a joke the 1-year-old would say: "Thanks Grandpa, I'm going to Stanford so this is going to help."

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